1990 (10) TMI 227 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 175/86.
2. Relationship between the appellants and M/s. Pharma Chem Distributors.
3. Use of common brand name/logo and its implications.
4. Invocation of the longer period for demanding duty under Section 11A of the Central Excises and Salt Act, 1944.
5. Determination of assessable value.

Detailed Analysis:

1. Eligibility for exemption under Notification No. 175/86:
The appellants claimed exemption under Notification No. 175/86 as a Small Scale Industries Unit. However, the Department found that they were using a brand name and logo (P/B) also used by M/s. P & B Laboratories of Bombay, who were not eligible for the exemption. The Collector concluded that the appellants were ineligible for the exemption because they were using the same brand name as P & B Laboratories, who were themselves ineligible for the exemption under Notification No. 175/86. The Collector's order was upheld, denying the exemption to the appellants.

2. Relationship between the appellants and M/s. Pharma Chem Distributors:
The Department argued that the appellants and M/s. Pharma Chem Distributors were related persons, citing common directors and financial transactions between the entities. The Collector found that the appellants and M/s. Pharma Chem Distributors were related persons because of the significant mutual interest and financial transactions between them. The Collector's order was supported by evidence such as financial investments, unsecured loans, and shared marketing expenses.

3. Use of common brand name/logo and its implications:
The Department found that both the appellants and P & B Laboratories were using the same logo (P/B), which was originally owned by P & B Laboratories. The appellants claimed that the logo was transferred to them in 1983, but the Department found no written documentation to support this claim. The Collector concluded that the use of the same logo by both entities indicated a connection in the course of trade, making the appellants ineligible for the exemption under Notification No. 175/86.

4. Invocation of the longer period for demanding duty under Section 11A of the Central Excises and Salt Act, 1944:
The appellants argued that the longer period for demanding duty could not be invoked because the issue of the relationship between the appellants and M/s. Pharma Chem Distributors had been previously decided in their favor. However, the Department contended that fresh evidence had come to light, justifying the invocation of the longer period. The Collector found that the fresh evidence, such as financial transactions and marketing arrangements, justified the invocation of the longer period for demanding duty.

5. Determination of assessable value:
The Department argued that the assessable value of the goods should be based on the selling price of M/s. Pharma Chem Distributors, as they were related persons. The Collector confirmed this, stating that the price at which the appellants sold their goods to M/s. Pharma Chem Distributors could not be treated as the assessable value. The assessable value should be determined based on the price at which the goods were sold by M/s. Pharma Chem Distributors, with permissible deductions as per law.

Conclusion:
The appeal was disposed of with the following conclusions:
- The appellants were ineligible for the exemption under Notification No. 175/86 due to the use of a common brand name/logo with P & B Laboratories.
- The appellants and M/s. Pharma Chem Distributors were related persons, and the assessable value should be based on the selling price of M/s. Pharma Chem Distributors.
- The invocation of the longer period for demanding duty was justified based on fresh evidence.
- The personal penalty was reduced to Rs. 15 lakh, and the appeal was disposed of accordingly.

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